Senators Wyden, Warner, and Brown Draft Stops Short of Fully Eliminating Tax Incentive to Offshore Jobs and Profits
WASHINGTON, DC – The Financial Accountability and Corporate Transparency (FACT) Coalition welcomes the discussion draft released today by Senators Wyden, Warner, and Brown on international corporate tax reform. While the draft legislation would curb tax-haven abuse, protect American jobs, and begin to meet the challenge set by the Biden Administration to end the international race to the bottom in corporate tax collections, more can be achieved through the inclusion of additional measures to equalize U.S. foreign and domestic corporate tax rates in the final legislation.
In reforming the tax code, the FACT Coalition urges Congress to consider fully equalizing the rates multinational corporations pay on their foreign and domestic profits by faithfully implementing reforms previously advocated for by the FACT Coalition. These reforms are an essential component to ensuring that long-overdue investments in hard and human infrastructure to help tackle persistent inequities and the fight against climate change are also funded in a manner that best increases the competitiveness of American working families and domestic businesses.
Legislative proposals that fall short of fully equalizing the rates run the risk of baking in continued tax-haven abuse and jobs outsourcing. In contrast, fully equalizing the rates would:
- significantly reduce tax incentives to offshore American jobs and capital investment to the benefit of working families; and
- significantly curb tax havens abuse, thereby improving tax morale and leveling the playing field between multinational corporations and small businesses.
“As FACT has previously noted, the budget process presents an historic opportunity, complemented by a potential agreement at the global OECD level, to reform the international tax system to meet overwhelming voter demands to create a fairer tax system, ” said Ian Gary, the Executive Director of the FACT Coalition. “By taking bold action now, Congress can curb multinational corporate tax avoidance, which starves governments around the world of the revenues they need to address economic inequality, global pandemics, and the climate crisis.”
Senators Wyden, Warner, and Brown have requested comments on their draft legislation by September 3, 2021. The FACT Coalition will provide more detailed comments before that date.
Notes to Editor:
- Summarily, the FACT Coalition has previously recommended the following U.S. international tax reforms:
- reforming the Global Intangible Low-Taxed Income (GILTI) tax to fully equalize rates on foreign profits with domestic rates and to calculate and apply any foreign tax credits on a jurisdiction-by-jurisdiction basis;
- replacing the Base Erosion and Anti-abuse Tax (BEAT) with more effective base-erosion rules that address readily manipulated concepts like costs of goods sold, such as via the President’s proposed Stop Harmful Inversions and End Low-tax Developments (SHIELD) tax;
- eliminating the Foreign-Derived Intangible Income (FDII) tax break and replacing it with incentives for domestic investment;
- eliminating tax breaks for foreign oil income; and
- tightening rules preventing inversions and limiting excessive and abusive interest deductions taken against US income.
- More information on the urgent case for international tax reform in light of the historic opportunity presented by this budget reconciliation process can be found here.
- Fixing U.S. international tax law to tax foreign and domestic profits equally is the single most popular corporate tax reform to voters, garnering 70 percent support in a recent non-partisan poll. Similarly, 71 percent of small business support equalizing foreign and domestic rates and putting an end to profit shifting.